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Commerce re-imagined


“Disbelief and denial, a sense that this is just temporary and things will soon return to the way they were, aren’t the ideal responses to change. Agility and adaptability are.”

History is littered with examples of organizations that did not adjust to change, or individuals who fought to restore their environment to the way it used to be. All these examples have something in common: they failed.

The introductory quote comes from an article in Chief Learning Officer magazine, calling on organizations to recognize the need to equip their people to understand the role they must play ‘as uncertainty and volatility become the reality of business’.

It is in this context that commercial innovation becomes critical. While the challenges we face will certainly lead to the invention of new or adapted products and services, the priority right now is to develop fresh thinking and approaches to commercial relationships and frameworks.

How will this be achieved?

Some inspired individuals – the innovators – will certainly generate new ideas and approaches. Capturing and replicating their innovations – the imitators – is the key to widespread change. Organizations need to identify leaders and rapidly equip them with experiences that force them to adapt their thinking and understanding – for example, through immersive case studies or the challenge of solving intractable problems through working groups, such as hackathons.

But it’s not just about preparing the individual to change. It’s just as much about assessing your team’s readiness for change. And that will be challenging for many businesses, especially since environmental change has already been thrust upon them with social distancing and home working.

Tackling these issues cannot wait until things return to normal – because that return isn’t going to happen. So true leaders and smart organizations are taking steps now to equip key people to oversee the shift in commercial relationships and operations, and to understand and fill the gaps in their team’s ability to work effectively in the new environment.

Working with those individuals and organizations is at the heart of IACCM‘s current work. Equipped with up-to-the-minute research, a dynamic portfolio of learning programs and workshops, on-line assessment tools and networks, the Association has shown itself uniquely positioned to support the development of agile and adaptable commercial capabilities.

Commerce re-imagined. That truly is the ideal response to change.

 

 

 

Adaptive & Agile: turning words to reality


Adaptive and agile. These are words that keep appearing in the context of how business (and government) must change. Adaptive and agile process. Adaptive and agile systems. Adaptive and agile workers. Adaptive and agile supply chain. The list goes on. Strangely enough, one of the few areas that has been missing is a call for adaptive and agile contracts – even though this is perhaps one of the most critical enablers of change. The rigidity of most contracts, along with serious under-investment in contracting process and capability, has become glaringly obvious throughout this pandemic.

Calls for adaptability and agility are scarcely new. The experience of coronavirus has shown that progress in embedding these capabilities and behaviors has been limited, especially in key aspects of supply relationships. The most recent IACCM report on the business impact of the pandemic draws from input by more than 2,000 commercial, legal and sourcing practitioners to identify not only the challenges, but more importantly what needs to change. The infographic below summarizes how our new commercial world must look if we truly want to build capability in managing uncertainty – to be adaptive and agile.

Next week, in webinars entitled ‘Emergence – Commerce & Contracting Post-COVID-19‘, IACCM will set out these findings in more detail and outline the steps being taken to truly ‘re-imagine commerce’ and make it truly adaptive and agile.

Supply relationships in a new world


Coronavirus has created an opening for new and more expansive thinking. Will CFOs take this opportunity to introduce real change and develop more sustainable business models?

Customers will ‘more closely review their suppliers’ financial health and diversification’ as a result of thecoronavirus experience. That’s one of the findings in a PwC survey of Chief Financial Officers, conducted April 6th-8th. PwC also discovered that immediate supply chain focus has diminished in the last few weeks, though broader concerns over procurement risk management remain high on the agenda.

Future supply chains

IACCM’s research has similarly indicated that there is extensive thought being given to the question of future supply chains – their robustness, sustainability, underlying economics. Many recognize that the current model of supply chain consolidation, just in time delivery and maximized risk transfer is a thing of the past, but they are far from clear about what the future may look like.

The pandemic will inevitably result in some suppliers going out of business and others merging or being acquired. So while CFOs may decide they want to diversify their supply base, they may find there is considerably less ability to do so. Equally, they may discover that suppliers are also going to be more selective about who they want as a customer. Financial health and diversification goes two ways – and as a supplier, I would certainly be wanting to review how customers and prospects behaved during the coronavirus crisis.

Is collaboration the way forward?

As IACCM’s studies have also shown, there will be interesting reviews of current ‘make versus buy’ decisions, as well as efforts to diversify supply options. Perhaps one of the most interesting aspects of the new world will be in areas of collaboration. Clearly, one option is for businesses to ‘hunker down’ and take a narrow, inward looking, view of risk. That is unlikely to work and there are far better, more expansive alternatives. For example, we anticipate more thought about development of resilient supply ecosystems, rather than simple supply chains. The need for increased access and transparency is one thing that the pandemic has made more urgent and networks or ecosystems are far more effective at delivering these attributes. We are also observing how suppliers are looking to increased cooperation, both vertical and horizontal. The relaxation of competition controls and, in some cases, direct encouragement by governments of joint-working may be here to stay. Already, there are signs that new collaborative ventures could form to reduce the exposure to shortages and to develop affordable and efficient availability models.

Much of this thinking is not new. Many executives have been aware for some time of the need for change in how risk is viewed and managed. They have recognized that the way their more important supply relationships are structured does not yield the best results. But making a significant change risks disruption. For example, if procurement strategies shift to a focus on outcomes and life-time value, what short-term impact might that have on costs and profitability? In markets where performance is based on quarterly earnings statements, changes like this are too unpredictable, so they don’t happen. But now, there is not only a need, but also a clear opening. Over the next year, it is inevitable that financial results for most corporations will look bad relative to the past – so this is surely an opportunity for more fundamental change. Let’s hope it happens!

Fears about job prospects on the rise


64% of Procurement staff, contract managers, in-house lawyers are worried about their career and job prospects in the wake of the economic destruction caused by coronavirus.

This data comes from IACCM’s series of spot surveys which have gathered input from more than 2,000 professionals across industries and world regions. None are immune – but the levels of fear vary quite dramatically. (Discover more on IACCM’s  ‘Getting a Job’ webinars)

What can I do about it?

Right now, professionals in this field are mostly very busy – evaluating or renegotiating existing agreements and relationships, engaging in new or updated contracts and sources of supply. Many are also involved in more strategic evaluations of future policies, new systems or streamlined processes. But working from home, socially distanced, they feel powerless to take control, to secure their future. As one wrote:”I feel disconnected – I don’t know even how to start looking”.

Such emotions are completely understandable and, like so much else, we need to adjust our ways of thinking and working. There will be opportunities, but people will find them and be selected to fill them in different ways. In many respects, our ‘socially distanced’ world may actually make things better – for example, physical location may matter less, and reliability of internet connection becomes critical. Skills at virtual communication will be a ‘must have’ attribute, as will on-line team working.

On April 21st and 22nd, IACCM is offering a webinar, Getting a job in a time of coronavirus. We will offer insight to the industries and geographies most and least affected by job fears, plus expert advice on the practical steps you can take to best position yourself for finding new or better opportunities. Find details and register HERE.

Post-COVID – will things go back to how they were?


A big item of debate right now is whether COVID-19 will cause fundamental change in the way we do business. Will it lead to a new era of collaboration? Will contracts become ‘fair and reasonable’? Or will organizations simply revert to the old ways of battling over price and risk?

Much may depend on whether the pandemic truly represents a social disruption (leading to transformation), or whether it is simply an interruption, following which things return pretty much to normal.

To give an example, in the 1300’s the Black Death eliminated around 25% of the world’s population. It led to shortages of labor, shifts in social power and geopolitics. COVID-19 is having far less impact on human life, yet short-term is having greater economic impact. Will that be enough to drive changes in our values and behavior?

A desire for change

In a poll this week, 93% of Contracts and Procurement professionals said that they hope the experiences of the pandemic will result in increased collaboration and long-term change. When asked whether they believe such change will occur, 17% say it won’t and 15% say any change will be short-term. But that left 68% who feel optimistic that this is a time when real change is possible.

That is good news – and collectively, it is something the commercial community can make happen.

The challenge of supply chain transparency


The Covid-19 pandemic has powerfully indicated why supply chain visibility is an essential feature of today’s business environment. Research shows that it is also acting as a catalyst for new thinking and approaches to sourcing strategy and customer delivery models.

The latest report in the IACCM Research Forum series, titled ‘Leveraging Extended Supply Ecosystems – the role of transparency’,  is therefore timely as a potential support for that new thinking. The in-depth study has been undertaken over a period of eight months and was able in its final stages to gather experience and intelligence from the pandemic, ensuring that the findings and recommendations remain pertinent to unfolding events.

The report draws an important distinction between supply chains, supply networks and supply ecosystems. All three have an important role to play within a sourcing strategy. All three require greater levels of transparency than typically exists today. Yet the drivers behind that transparency – and the selection of which supply models to use – vary considerably. They range from market-controlling to market-making in their nature and we see a number of forces promoting the ecosystem approach. These include:

  • A need to deal with heightened levels of market uncertainty calling for more rapidly adaptive structures
  • A need for increased collaboration to deal with shifting risk profiles and supply economics
  • A need to confront a reduction in competition as suppliers consolidate or go out of business
  • A need for creative approaches to develop new ecosystems as a route to innovation and to hasten business recovery

At such an unpredictable time, we see this report as very much a ‘work in progress’ – the world continues to learn and many existing relationships and supply networks are inherently unstable. A key benefit of the research is that it helps organizations distinguish their relationships based on five distinct categories of purpose and guides them in the way such relationships should then be structured, motivated and managed. It also dispels the illusion that today’s ‘supply relationships’ are exclusively the preserve of Procurement or Supply Management functions and hence the need for thought on how best to organize and integrate activities in this area.

For more information about this report, contact info@iaccm.com

“Will the last supplier turn out the lights”


The global financial crisis reduced competition by more than 20%. It is reported that the average number of bidders fell from eight before the collapse to six today. Some went out of business; others consolidated. In a few industries, this resulted in a shift of power. In others, buyers remained dominant and continued to drive down prices and margins.

The Covid-19 pandemic is arguably even more disruptive than the financial crisis. Some 90% of businesses are either issuing or receiving notices of Force Majeure. 85% are reviewing their rights of contract termination or delay. The impact on supply chains is unprecedented and has left many scurrying to better understand their current sources of supply and to identify possible alternatives. Almost 60% of businesses are re-evaluating their sourcing strategies and seeking additional or alternative suppliers.  There are signs of growing collaboration between buyers and suppliers and even between competitors to maintain viable business operations.

In some cases, companies have recognized the threat to the viability of their supply chain and are providing support – for example, by early payment or renegotiated terms. But in others, the opposite is happening – delayed payment, demand for discounts, cancellation of orders even for finished products. At a strategic level, some 22% of businesses are considering bringing activities back in-house.

After years of aggressive cost-cutting, many supply chains were already fragile before the pandemic hit us. That fragility will inevitably lead to a further reduction in sources of supply. It will force many buyers to develop new approaches. Some will bring work back in-house, often through M&A activity. Others will engage in increased partnering with their suppliers. Many will seek to diversify sources of supply – but may struggle to do so.

This is a time when ethics are tested and reputations are forged. It is a time when trust and loyalty is built, or destroyed. Some businesses will survive at the expense of others. Some will survive because of others. But when it all ends, we will certainly find that many have disappeared and that the supply landscape – and the relationships within it – look very different from the way they were at the end of 2019.

 

Concerned about your job? Focus on differentiation


As coronavirus sweeps around the world and recession looms, professionals from almost every discipline are wondering about the security of their job and income. Many are right to be concerned, but the bigger question is surely what to do about it.

Change is needed

Writing in Forbes, Mark Cohen summed up some of the critical areas where change is needed, pointing to the urgent need to eliminate organizational stovepipes and data bottlenecks: “Differentiation will become even more critical and so too will the need to collaborate with others in the supply chain. Talent platforms will accelerate this change process. There will be more collaboration across firms, corporate departments, and other providers, and the artificial divides separating them will disappear.”

Breadth and inclusion

The roles performed within a commercial and contract management process are at the foundation of these changes, yet the professionals performing those roles have in general been poorly served by universities, business schools and professional bodies. Rather than teaching breadth, they have tended towards depth; rather than encouraging collaboration, they have tended to encourage views of suspicion and skepticism to ‘outsiders’; rather than taking people on a life-long learning journey, they have tended to suggest that they offer a qualification for life.

From the time of its inception 20 years ago, IACCM promoted an alternative view. It sought to provide a curriculum and continuous development that would bring together buyer and supplier perspectives, that incorporated legal and financial thinking and a whole-world perspective – in other words, encouraging collaboration within and across supply chains, promoting cross-functional empathy and coordination. For the last 16 years, that learning and certification platform has been available on-line, making it easy, efficient and low cost to access and to maintain personal learning and qualifications, relevant to these uncertain and fast-changing times.

No need for worry?

Now, that same approach is making a break-through into the university sector, with the acknowledgment that cross-disciplinary learning is urgently needed to develop social and business capability. The University of Leeds is at the forefront, but not alone in working with IACCM to develop exciting new commercial programs.

Does this mean that individuals with an IACCM certification have no cause for concern? Of course not. But it is interesting to note that, in a recent survey, nearly 80% of those in commercial roles (procurement, legal, contract management) are somewhat or very concerned about their job and career prospects. Among those with IACCM qualifications and continuous learning, that drops to slightly less than 50%. The reason? Differentiation – the ability to add value by being part of an outward-looking collaborative community.

Managing contracts proving harder for Procurement


The level of investment in Procurement technology has far outdistanced the spending on customer contract management – but the coronavirus pandemic is revealing weaknesses. A survey of 500 companies, ranging in size from $100 million to over $40 billion, reveals that Procurement groups have faced greater difficulty than their sell-side colleagues in several key areas:

  • finding the current executed contract (22% versus 16% say this is proving very difficult):
  • searching for specific clauses or terms (32% versus 17%);
  • assessing and reporting risk (35% versus 23%).

This is leading many to re-evaluate current technology and set wheels in motion to tackle the identified weaknesses. For some, that is simply a renewed determination to ensure enterprise-wide adoption, but for more than 30% it involves acquiring additional functionality within the next six months.

Replace or augment?

The survey shows very few organizations planning to replace existing systems – this really is a story of building on what they have. However, there is also an appreciation that this may be difficult to achieve through their existing vendor. For example, the need for advanced analytics, for collaboration tools and for increased supply chain visibility will often not be met by a traditional P2P provider.

For those without large-scale automation, the pandemic has added to the business case for investment – though it is interesting to note that those with existing systems are more likely to see their systems as ‘business critical’ than those without (35% versus 21%). It is encouraging to see that there is no immediate rush to implement – those without automation understand it would bring benefits, but also appear aware of the need for careful preparation. Hence the immediate commitment is focused on better defining or driving cross-business consistency of process, developing or updating standards and creating term databases. Without those steps, many appreciate that software implementations will fail.

Has technology proved worthwhile?

The picture is more mixed than expected. In part, the answer depends on whether organizations have the right technology. For example, a repository of signed agreements is helpful, but if it has no robust search facility and no support on risk analytics, it will have offered little help in handling the current crisis. Overall, the percentages of those reporting extreme difficulty or extreme ease in handling contract issues and evaluations show that those with technology have benefited, but only by a net margin of around 12%. It is interesting to note – again contrary to expectations – that company size made little difference to these findings.

It is industry segmentation that reveals the most significant variations. Clearly, different industries are experiencing different levels and forms of impact. The survey report will delve into those in detail.

The IACCM survey was undertaken in the period April 1st – 6th and gathered input representing 507 organizations. The full report will be issued in the week of April 14th.

Managing contracts in a time of coronavirus


The coronavirus pandemic has disrupted trading relationships worldwide – and as a consequence we are seeing negotiation and renegotiation of contracts on a massive scale. This would be difficult to manage in the best of times, but right now, with home working the norm for many employees, it presents a monumental challenge.

So how has the contract management community been faring and what can we learn from progress to date? IACCM has conducted a number of studies that offer us insight.

The extent of disruption

First, how extensive is the disruption? The answer to that varies quite significantly by industry and, to some extent, by geography, but we know that by mid-March, around 60% of businesses were reporting moderate to severe impact on their contracts – both with suppliers and to customers. The pandemic has had a rolling effect as it spread around the world, steadily resulting in mass shut-downs and distancing.

The nature of that disruption differs between industries. For some, customer demand is increasing and generating a need for both new and revised contracts – for example, food and drink, consumer packaged goods, health, transport and logistics. For others, the story is almost entirely negative – airlines, hotels, travel and entertainment. Almost everywhere, this has resulted in a strong focus on Force Majeure, rights of increase or reduction, revisions to scope, deferral or delay. And that is not to mention the need for extensive reporting as management seeks rapid information on risks and rights within existing agreement portfolios.

A scale of difficulty

All this has been far from easy. IACCM members were asked how difficult it was to find their contracts or to analyze the contents. On a one to five scale of difficulty, they reported on average a level four. Not surprisingly, the larger the business, the greater the difficulty. But it was also notable – and not surprising – that those with contract management technology generally fared much better than those without. This not only allowed much faster identification and analysis, it also reduced the time spent searching and freed it up for more rapid and thorough interaction with the counter-party.

For many, this was the first real test of the ability of their systems to cope with such peak demand – and most discovered areas for improvement. Indeed, 85% identified the need for action, either in enhancements or additions to their existing systems or an acceleration of deployment across the business. But while there were some obvious shortfalls in performance, none to date have indicated a plan to replace an existing system, which testifies to the fact that the quality of contract management automation has improved significantly over the last few years.

What does current automation lack?

Basic functionality of an easy to use, searchable repository is naturally the underpin to any system. Most have other features, which may or may not have proved helpful at this time. Many do not have some of the tools that would have been especially useful in managing contracts and risks more effectively. Top of the wish list for improvements are things like:

  • Improved collaboration tools
  • The ability to search into deeper levels of the supply chain
  • Better links between systems to improve data flows
  • More powerful analytics

An opportunity for immediate help

By way of conclusion, it is worth noting that several vendors have stepped forward and are offering the chance to trial systems during this time of crisis. Among them are:

CommonPage, a platform that supports collaborative negotiation using either embedded templates, or the upload of a specific agreement, is offering free trials until May 1st.

ThoughtTrace is offering businesses free access to the ThoughtTrace Platform: COVID-19 Response Pack, contract analysis software that uncovers business implications of COVID-19.  This innovative solution will help companies affected by COVID-19 gain perspective on their unique situation and economic implications triggered by this pandemic. It gives teams the ability to immediately find the most important contractual elements for understanding their coverage, risk exposure, and maximum resulting liability.

Juro  Since the onset of the COVID-19 pandemic,  Juro has been seeing an increased demand from the its community to be able to collaborate remotely on contracts.  Juro has made its  Basic plans FREE for up to two users, to help businesses create, negotiate, agree and manage contracts right away.

scoutbee is offering free Covid-19 Emergency Supply Chain Support, providing rapid emergency supplier-search for critical and scarce items such as surgical masks, protective suits, cotton swabs and more NGOs, public bodies, local and national governments and healthcare providers with urgent pharma or medical sourcing needs.

Conga is helping nonprofits  and supporting those serving our communities with unlimited eSignConga is  offering Conga Sign for Salesforce for free, to any 501(C3) nonprofit that is not a current Conga Sign customer, through 9/30/20.  With Conga Sign for Salesforce, nonprofits can get essential fundraising letters, grant contracts, and forms signed instantly and remotely, so they can function more efficiently when their services are needed most.  https://conga.com/sign-nonprofits

ContractNow is a contract management application through which you can centralize your contracts, identify key clauses and execute new agreements with integrated eSign. It is offering use at no charge until September 1st.